Casualty Terms

Front 1

Deductible

Back 1

Amount the insured is obligated to reimburse the carrier for each occurrence, accident, or claim under a deductible policy. Carrier is obligated to pay claims even if not reimbursed by the client so requires collateral. Limits include the deductible amount.

Front 2

Loss Limit

Back 2

Amount the insured is obligated to reimburse the carrier for each occurrence, accident, or claim under a retro policy. Carrier is obligated to pay claims even if not reimbursed by the client so it requires collateral. Limits include the deductible amount

Front 3

SIR

Back 3

Self Insured Retention is the dollar amount specified in an insurance policy that must be paid by the insured before the insurance policy will respond. carrier is not obligated to pay amount within the SIR and therefore does not require collateral. Limits sit above the SIR amount.

Front 4

Aggregate Deductible

Back 4

the greatest amount the insured will be obligated to reimburse under the deductible or retrospective policies

Front 5

Aggregate Limit

Back 5

The greatest amount the policy will pay

Front 6

ALAE

Back 6

Allocated Loss Adjustment Expense are claim handling expenses that are directly allowable to a specific claim and might include the following: court costs, legal fees associated with attorneys, witnesses, experts, depositions, recorded statements, summonses, copies of public records, alternative dispute resolution proceedings, investigative services, medical examinations, etc…

Front 7

ULAE

Back 7

Unallocated Loss Adjustment Expenses that are not directly allocated to a specific claim. ULAE may be charged by applying either a “LCF” or “CHF”

Front 8

LCF

Back 8

Loss Conversion Factor is a factor applied to Paid or Incurred Losses by a carrier to recoup ULAE costs on a casualty program

Front 9

CHF

Back 9

Claim Handling Fee or Fee per Claim is a dollar amount charged per reported claim to recoup ULAE costs on a casualty program by either a TPA or carrier

Front 10

Paid Loss Billing

Back 10

Bill from carrier or TPA issued to client for reimbursement of losses paid on their behalf within the deductible or loss limit

Front 11

Escrow/Loss Fund

Back 11

Non-interest bearing account held by carrier or TPA to provide for payment of obligations within the deductible or loss limit

Front 12

Collateral

Back 12

Financial instrument provided by the Insured to the carrier to secure payment of their obligations under a Deductible or Retro program

Front 13

COC

Back 13

Cost of Collateral is the cost to the Insured to secure a collateral instrument usually in terms of basis points (BBS) 100 Basis Pts = 1%

Front 14

Loss Pick

Back 14

Anticipated amount of losses the client will incur during the life of the policy for losses that occurred during the policy period. Typically spoken of in terms of being limited to the deductible/loss limit amount

Front 15

Loss Rate

Back 15

Incurred Losses in a policy term per $100 or $1,000 of exposure (WC typically $100 of payroll; GL typically $1,000 of Revenue; Auto typically per power unit)

Front 16

Ultimate Loss Rate

Back 16

Loss Rate adjusted for development to reflect the anticipated ultimate financial outcome

Front 17

Frequency Rate

Back 17

Number of claims in a policy term annualized as a rate per some exposure basis (WC typically $1M of payroll; GL typically $1M of Revenue; Auto typically per power unit)

Front 18

LDF/IBNR

Back 18

Loss Development Factor/Incurred But Not Reported Factor is a multiplier used to increase currently valued losses to reflect claims that have occurred but not yet been reported and/or anticipated changes in the incurred amount for claims that have been previously reported

Front 19

Premium Surcharges & Assessments

Back 19

Amounts charged by state governments and/or agencies levied on the basis of premiums. Typically considered a “pass through”

Front 20

Premium Tax

Back 20

Taxes charged by states on the premium within the state that may be based on Standard Premium before or after experience modification, Deductible Premium, or Retrospective Premium (expressed as a Tax Multiplier)

Front 21

LBA's

Back 21

Loss Based Assessments are state charges applied against losses

Front 22

Recoveries/Subrogation

Back 22

The portion of payment made under the policy that the carrier or TPA recovers from anyone liable for the loss. Typically applied to any portion of loss excess of the deductible first and then to amounts within the deductible second.

Front 23

Managed Care

Back 23

Management of the utilization of care and costs associated with claims covered by Workers Compensation. Typically a separate charge in addition the claims handling fees or LCF. Typically billed as a percentage of savings or on a per bill basis

Front 24

TPA

Back 24

Third Party Administrator is a vendor with whom the client enters into a contract to adjust claims on their behalf. Also known as Claims Administrator, they must be approved by the carrier who has a separate contract/agreement in place in addition to the one between the client and the TPA.

Front 25

Manual Premium

Back 25

Premium as calculated by Workers Compensation Payroll multiplied by manual/filed rates for each class code

Front 26

Standard Premium

Back 26

Manual premium adjusted for experience using experience modifier

Front 27

Deductible Premium

Back 27

Standard Premium adjusted using deductible filing/credit in order to charge premium needed based on loss rating

Front 28

Basic Premium

Back 28

Basic Premium is a percentage of standard premium. In the large account space it is negotiated based on what carrier “needs” based on loss rating but in middle markets it can be a percentage of standard. This is the fixed cost component of a Retro and the true “sticking premium”

Front 29

Excess Premium

Back 29

Excess premium is premium charged for anticipated losses as well as profit & loss excess (P&L) of the deductible, loss limit or SIR. On a Retro it can be included within the Basic Premium or a separate component.

Front 30

Earned Premium

Back 30

Portion of a policy’s premium that applies to the expired portion of the policy. Although insurance premiums are often paid in advance, insurer’s “earn” the premium at an even rate throughout the policy term. The unearned portion of the premium that has been paid is kept in the “unearned premium reserve.”